Editorial February 2021

Editorial February 2021

Reclaim the State

And so, the deed is done.  We are out of Europe.  A last-minute deal means that the trucks are able to continue rolling through Dover and the other points of departure to Europe.  There are no tariffs or quotas and a much lower level of paperwork than had been feared.  The fishing folk are somewhat disgruntled but will be ignored.  The deal was ratified by Parliament on 30thDecember.  Johnson was triumphant.  He had got ‘Brexit Done’ and with a trade deal.  Starmer was visibly uncomfortable.  

Before the December 2019 General Election Starmer had manoeuvred the Labour Party into a policy of essentially trying to stop Brexit by holding a 2nd referendum which would reverse the ‘Leave’ vote of the first referendum.  It was a gamble by Starmer and others in the shadow cabinet like McDonnell and Abbot.  Corbyn did not like the policy but seemed not to have the leadership ability to oppose it.  Labour, under Starmer’s guidance, essentially fought the 2019 GE with a ‘Let’s Stop Brexit’ policy, resulting in the loss of 55 ‘Leave’ voting seats in the Labour heartlands, a working class which felt betrayed and a Tory party with an 80-seat majority in Parliament.  Starmer’s gambit had failed spectacularly.  No wonder that Starmer felt uncomfortable whipping his party  on 30th December to support a deal that, in his eyes, was worse than previous deals he had blocked in Parliament.

Johnson’s deal must be recognised as a significant achievement.  The chief EU negotiator, Michel Barnier, was opposed to a deal if the UK did not agree to the ‘level playing field’ EU regulations which limit the rights of EU states to actively intervene in their economies and support selected industries.  Johnson refused to accept these conditions.  In the final hours of negotiation, it was the EU that conceded tariff and quota-free trade on the basis that the EU could, in the future, introduce tariffs and quotas if the UK were ever to deviate from the ‘level playing field’ which currently exists.  Chapter XI of the Trade section of the agreement entitled ‘Level playing field for open and fair competition and sustainable development’ covers the issues.  It reads like a lot of pious hopes but basically states that the UK is free to do what it wants in the economic sphere and that, whatever they do, they cannot be accused of having broken the agreement.  But the EU can take retaliatory action, presumably in the form of tariffs and quotas, should it wish.  

As Johnson said in his introductory speech to the debate in Parliament: 

I must make an important point. If, in using our new freedoms, either Britain or the EU believes it is somehow being unfairly undercut, then, subject to independent third-party arbitration, and provided the measures are proportionate, either of us can decide, as sovereign equals, to protect our consumers, but this treaty explicitly envisages that any such action should be infrequent. 

“However, the treaty banishes the old concepts of uniformity and harmonisation, in favour of the right to make our own regulatory choices and deal with the consequences. Every modern free trade agreement includes reciprocal commitments designed to prevent distortions of trade. The true significance of the agreement embodied in the Bill is that there is no role for the European Court of Justice, no ratchet clause on labour or environmental standards, and no dynamic alignment with the EU state aid regime or, indeed, any other aspect of EU law. In every respect, we have recovered our freedom of action.”

Why did Johnson refuse to accept any limitation on UK State actions in the economic sphere?  As of now we do not know.  But it seems unlikely that he would insist on a right which he did not intend to use.  It is not impossible that he may wish to create a low regulation, low tax economy – a Singapore on Thames.  But any desire to go in that direction is severely constrained by his need to retain those 55 Leave voting seats that were won from Labour in 2019.  It was noticeable how little Johnson had to say on the financial service sector when he presented the deal to Parliament for approval.  It would be surprising if Johnson moves to rebalance the economy away from financial services.  Yet, retaining the 55 ‘red wall’ seats may well require such a move.

The substance of Keir Starmer’s statement on the deal in Parliament was that a bad deal was better than no deal.  Except he chose to call it a ‘thin’ deal.  It had been noticeable how little Starmer had to say on the deal with Europe as it was being negotiated.  He pointed out with somewhat tedious repetition that a ‘no deal’ outcome would be catastrophic.  It would certainly have given the UK a huge number of problems which it could have done without.  But Starmer expressed no views on whether it was important that the UK retained the right to intervene in the economic life of the state whenever and however it wished.  In the debate in Parliament on 30th December Starmer stated:

“The situation sets out the fundamental dilemma that has always been at the heart of the negotiations. If we stick to the level playing field, there are no tariffs and quotas, but if we do not, British businesses, British workers and British consumers will bear the cost. The Prime Minister has not escaped that dilemma; he has negotiated a treaty that bakes it in. This poses the central question for future Governments and Parliaments: do we build up from this agreement to ensure that the UK has high standards and that our businesses are able to trade as freely as possible in the EU market with minimal disruption; or do we choose to lower standards and slash protections, and in that way put up more barriers for our businesses to trade with our nearest and most important partners?”

“For Labour, this is clear: we believe in high standards. We see this treaty as a basis to build from, and we want to retain a close economic relationship with the EU that protects jobs and rights, because that is where our national interest lies today and tomorrow. However, I fear that the Prime Minister will take the other route, because he has used up so much time and negotiating capital in doing so. He has put the right to step away from common standards at the heart of the negotiation, so I assume that he wants to make use of that right as soon as possible. If he does, he has to be honest with the British people about the costs and consequences of that choice for businesses, jobs and our economy. If he does not want to exercise that right, he has to explain why he wasted so much time and sacrificed so many priorities for a right that he is not going to exercise.”

Starmer’s argument is odd.  He suggests that he believes it would have been better to conclude a deal with Europe in which the freedom of action of the UK would have been forever limited rather than one in which the UK is free to do what it wants in the economic sphere but must accept the consequences of their actions.  Starmer suggests that Johnson will use these rights to undermine workers standards and create a low wage, low tax economy.  He may well be right.  But Starmer ignores the fact that the UK state is free now to actively intervene in UK economic matters should it wish to do so.  This suggests that Starmer sees no great role for the state in the management of the British economy and instead subscribes to the view that economic matters are best left to private enterprise.

But what Starmer needs to do is to embrace the deal as a device to reclaim the role of the UK state when the private sector fails.  The private sector certainly failed to revive the ‘red wall’ constituencies after Thatcher destroyed the coal industry in the mid to late 1980s.  The UK state should have stepped in to fill the gap.  When Blair won his landslide in 1997, he could have reclaimed the role of the UK state to revitalize these destroyed communities.  Instead, Blair bought into the Thatcher vision that the private sector knows best.  The result of Blair’s impoverished vision was impoverished communities and Brexit.

Starmer must seize this opportunity to demarcate the Labour Party from the Tories by reclaiming the state as an essential positive force in the running of a capitalist economy.  Starmer must use the state to guarantee Full Employment and revitalize the Labour heartlands without any preoccupation about the size of the national debt. 

There are many indications that some Tories have realized that the size of the national nebt is a matter of little consequence.  They will use that realization to ensure they retain those 55 ‘red wall’ seats.  If Starmer does not reclaim the state, Johnson may well do so and relegate Labour to the electoral wilderness for another 10 years.

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